Form 982 - Reduction Of Tax Attributes Due To Discharge Of Indebtedness (And Section 1082 Basis Adjustment) Page 4

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Form 982 (Rev. 2-2011)

Page

Line 2

Qualified acquisition indebtedness is (a) debt incurred or

assumed to acquire, construct, reconstruct, or substantially

Enter the total amount excluded from your gross income due to

improve real property that is secured by such debt and (b) debt

discharge of indebtedness under section 108. If you checked

resulting from the refinancing of qualified acquisition

any box on lines 1b through 1e, do not enter more than the limit

indebtedness to the extent the amount of such debt does not

explained in the instructions for those lines. If you checked line

exceed the amount of debt being refinanced.

1a, 1b, or 1c, this amount will not necessarily equal the total

You cannot exclude more than the excess of the

reductions on lines 5 through 13 (excluding line 10b) because

outstanding principal amount of the debt (immediately before

the debt discharge amount may exceed the total tax attributes.

the discharge) over the net FMV (as of that time) of the

If you checked line 1e, this amount will not necessarily equal the

property securing the debt reduced by the outstanding principal

total basis reduction on line 10b (which is required only if you

amount of other qualified real property business indebtedness

continue to own the residence after the discharge).

secured by that property (as of that time). The amount excluded

See section 382(l)(5) for a special rule regarding a reduction of

is further limited to the aggregate adjusted basis (as of the first

a corporation’s tax attributes after certain ownership changes.

day of the next tax year or, if earlier, the date of disposition) of

depreciable real property (determined after any reductions

Line 3

under sections 108(b) and (g)) you held immediately before the

discharge (other than property acquired in contemplation of the

You can elect under section 1017(b)(3)(E) to treat all real

discharge). Any excess is included in income.

property held primarily for sale to customers in the ordinary

course of a trade or business as if it were depreciable property.

This election does not apply to the discharge of qualified real

Line 1e

property business indebtedness. To make the election, check

Check this box if the income you exclude is from discharge of

the “Yes” box.

qualified principal residence indebtedness. Also, be sure you

Part II

complete line 2 (and line 10b if you continue to own the

residence after discharge). However, if the discharge occurs in a

Basis Reduction

title 11 case, you must check the box on line 1a and not this

box. If you are insolvent (and not in a title 11 case), you can

If you check any of the boxes on lines 1a through 1c, you can

elect to follow the insolvency rules by checking box 1b instead

elect, by completing line 5, to apply all or a part of the debt

of checking this box. For more information, see Pub. 4681.

discharge amount to first reduce the basis of depreciable

property (including property you elected on line 3 to treat as

Principal residence. Your principal residence is your main

depreciable property). Any balance of the debt discharge

home, which is the home where you ordinarily live most of the

amount will then be applied to reduce the tax attributes in the

time. You can have only one main home at any one time.

order listed on lines 6 through 13 (excluding line 10b). You must

Qualified principal residence indebtedness. This

attach a statement describing the transactions that resulted in

indebtedness is a mortgage you took out to buy, build, or

the reduction in basis under section 1017 and identifying the

substantially improve your main home. It also must be secured

property for which you reduced the basis. If you do not make

by your main home. If the amount of your original mortgage is

the election on line 5, complete lines 6 through 13 (excluding

more than the cost of your main home plus the cost of any

line 10b) to reduce your attributes. See section 1017(b)(2) and

substantial improvements, only the debt that is not more than

the cost of your main home plus improvements is qualified

principal residence indebtedness. Any debt secured by your

Line 7

main home that you use to refinance qualified principal

If you have a general business credit carryover to or from the tax

residence indebtedness is treated as qualified principal

year of the discharge, you must reduce that carryover by 33

residence indebtedness, but only up to the amount of the old

cents for each dollar excluded from gross income. See Form

mortgage principal just before the refinancing. Any additional

3800, General Business Credit, for more details on the general

debt you incurred to substantially improve your main home is

business credit, including rules for figuring any carryforward or

also treated as qualified principal residence indebtedness.

carryback.

Amount eligible for the exclusion. The exclusion applies only

to debt discharged after 2006 and before 2013. The maximum

Line 10a

amount you can treat as qualified principal residence

In the case of a title 11 case or insolvency, the reduction in

indebtedness is $2 million ($1 million if married filing separately).

basis is limited to the aggregate of the basis of your property

You cannot exclude from gross income discharge of qualified

immediately after the discharge over the aggregate of your

principal residence indebtedness if the discharge was for

liabilities immediately after the discharge. However, this limit

services performed for the lender or on account of any other

does not apply to a reduction in basis reported on line 5

factor not directly related to a decline in the value of your

pursuant to section 108(b)(5).

residence or to your financial condition.

Line 10b

Ordering rule. If only a part of a loan is qualified principal

residence indebtedness, the exclusion applies only to the extent

If box 1e is checked and you continue to own the residence

the amount discharged exceeds the amount of the loan

after discharge, enter the smaller of:

(immediately before the discharge) that is not qualified principal

residence indebtedness. For example, assume your main home

• The part of line 2 that is attributable to the exclusion of

is secured by a debt of $1 million, of which $800,000 is qualified

qualified principal residence indebtedness, or

principal residence indebtedness. If your main home is sold for

• The basis of your main home.

$700,000 and $300,000 of debt is discharged, only $100,000 of

the debt discharged can be excluded (the $300,000 that was

discharged minus the $200,000 of nonqualified debt). The

remaining $200,000 of nonqualified debt may qualify in whole or

in part for one of the other exclusions, such as the insolvency

exclusion.

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